I ditched corporate America in 1994 and started a management consulting and venture capital firm (http://petercohan.com). I started following stocks in 1981 when I was in grad school at MIT and started analyzing tech stocks as a guest on CNBC in 1998. I became a Forbes contributor in April 2011. My 11th book is "Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision" (http://goo.gl/ygaUV). I also teach business strategy and entrepreneurship at Babson College in Wellesley, Mass.

EMC's Aveksa Buy Adds To Boston's Enterprise Preeminence

Silicon Valley gets the press for its consumer Internet plays, but when it comes to making software and hardware for businesses, Boston is leader of the world’s pack. If you invest in enterprise start-ups, EMCEMC‘s July 8 deal to acquire Waltham, Mass.-based security/identity management software provider, Aveksa, is a good example of Boston’s enterprise leadership.

Identity management software is intended to make sure that a company can control who accesses which parts of its business applications. For example, identity management should let, say, an accounts payable manager log into a company’s payment application and make payments of no more than say, $5,000, on behalf of the company. If that manager gets fired, the identity management system should block his access to the application immediately.

As Aveksa board member, Izhar Armony, general partner at Charles River Ventures, explained in a July 8 interview, ”We seeded Deepak [Taneja, Aveksa Founder and Chief Technology Officer] with $300,000. He had been CTO at Netegrity and Computer Associates acquired the company” for $430 million in 2004.

Armony was making a bet on Taneja’s track record and vision for the identity management industry. As Armony explained, “He saw in 2005 that mobile and cloud-computing would change IT, and that would create demand for new kinds of identity management products. Deepak was ahead of his time because he came to this realization before the iPhone was introduced and before cloud computing existed in its current form.”

Armony added an executive with business development skills to the Aveksa team to complement Teneja’s technical vision. “We were delighted to be able to hire as president and CEO, Vick Viren Vaishnavi, who had helped BladeLogic achieve 100% annual growth, a successful IPO and an acquisition by BMC.”

While declining to confirm a Times of India report that EMC paid $225 million in cash for Aveksa — which collected a total of $35 million in capital before EMC bought it — Armony did provide evidence of the company’s growth. “Aveksa spent several years developing its product with no revenue. In recent years Aveksa hit an inflection point. It generated dozens of millions in revenues, employed over 150 people, and had many dozens of big customers with over 10,000 employees.”

Why did Aveksa gain market share? Armony explained, “No competitors were able to offer a service that let identity management work on mobile devices over the cloud. And Aveksa provided a valuable identity governance function that lets companies analyze who is accessing which applications. This is useful for compliance.”

Aveksa would have liked to have continued growing until it could sell its shares to the public. However, several big companies made offers to acquire Aveksa and Armony concluded that he could not refuse them. “Companies like EMC and other big vendors needed the functionality that Aveksa supplied. We were afraid that if we did not sell, they would develop their own applications or acquire a competitor. Now that we are part of EMC, it will be much easier to sell Aveksa as part of EMC’s full identity management portfolio.”

Armony believes strongly that the Boston area — he now thinks its white hot center is in Cambridge’s Kendall Square where MIT graduates want to live, work and play without owning cars — is the world’s leader in enterprise technology start-ups. He moved to the area from Israel.

“I was part of a start-up in Israel called Onyx Interactive that was sold. After I graduated from business school [he earned an MBA from Wharton in 1997], I joined Charles River Ventures because I thought I would enjoy helping start-ups go through what I had experienced. I had some lucky investments in the 1990s and I am still here 16 years later.”

This deal is a big win for Aveksa’s investors but Boston needs more pillar companies and by selling out to EMC, it has lost the chance that Aveksa might have gone public and become such a pillar.

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